As in the United States, policymakers in other countries are overwhelmed by persistently high inflation. Price increases were expected to slow as economies recovered from the pandemic, but rising energy and food prices continued to push inflation across the globe.
After Russia invaded Ukraine, predictions about the future of inflation were torn apart and revised much higher in the face of rising commodity prices. The war sparked fears over the stability of Russia’s energy supply, which is crucial for Europe, and disrupted food production, increasing the risk of a global hunger crisis. Meanwhile, supply chains remain burdened by pandemic-induced disruptions and demand for some goods is still greater than production can handle.
High inflation rates are rife: In the United States, the euro area and other so-called advanced economies, 60 percent of countries have annual inflation rates above 5 percent, according to the Bank for International Settlements, a central bank. It is the largest share since the 1980s and a serious problem for central banks, which typically aim for 2 percent inflation. In emerging economies, more than half of the countries have an inflation rate of more than 7 percent, the bank said. For now, China and Japan are notable exceptions.
“We may be on the cusp of a new era of inflation,” the bank’s head Agustín Carstens said last week. “The forces behind high inflation may persist for some time to come.”
After more than a decade of central banks in the United States and Europe trying to raise inflation towards their targets and keep it stable, policymakers are suddenly struggling to tame it. Energy and food prices are often volatile, but what worries central bankers is that price hikes trickle down to other goods and services, followed by workers demanding higher wages to meet the higher cost of living.
Inflation in Britain is at its highest point in three decades. Prices rose 6.7 percent in March from a year earlier, economists surveyed by Bloomberg expect data released on Wednesday to show this. The Bank of England has already raised interest rates to pre-pandemic levels three times since December, amid mounting evidence that companies are responding to rising prices with higher wages.
In the eurozone, annual inflation rose to 7.5 percent in March, from 5.9 percent a month earlier. Higher energy prices are the main driver of inflation there, with far fewer signs of significant wage increases. But the European Central Bank has launched a plan to end its massive bond-buying program to pave the way for rate hikes as “inflation broadened and became more persistent,” the report said. recent policy meeting. Policymakers will meet again this week.
Even in Japan, which has been battling very low or negative inflation rates for decades, there is a sign that higher prices are reaching its shores. Last month, a government survey of consumer one-year inflation expectations rose to 2.7 percent, the highest level since 2014.
